Benefits of Nonprofit Incorporation
First and foremost, nonprofit incorporation is necessary to obtain 501(c)3 tax-exempt status, which opens the floodgates to accessing the financial resources needed to run a successful nonprofit business and drive your mission forward.
Here are the top 3 benefits of nonprofit incorporation and 501(c)3 tax-exempt status:
1.Qualifying for public or private grant money – Excellent source for funding your mission.
2.Solicit tax-deductible contributions – You’ll be highly attractive to donors as they can write off their gifts on their tax returns.
3.Personal liability protection – Should you find yourself in a lawsuit, incorporation protects members and directors from personal liability, so your money, house, cars,or any other property is not at risk.
How to Incorporate Your Nonprofit Organization
Also, nonprofit incorporation is different from creating a for-profit corporation. Not only must a nonprofit file at the state level and take the additional steps of applying for 501(c)3 tax-exempt status, but special language must be attached to the original Articles of Incorporation as recorded by the Secretary of State. If this is not done properly your IRS Form 1023 application for tax-exempt status will either be rejected or significantly delayed by the IRS.
Put simply, incorporating means creating the entity in your home state by filing Articles of Incorporation, but what exactly are Articles of Incorporation? Watch this quick video to find out.
Now that you know what Articles of Incorporation are, here are the steps you need to take to file for nonprofit incorporation:
- 1Draft a Unanimous Consent Resolution: This allows you to authorize officers, activities and general responsibilities. Download a sample here.
- 2Create your Articles of Incorporation: Some states allow a single incorporator, but if yours isn’t one of them ask a couple of friends to serve on your Founding Board.
- 3You’ll need two board members to file for 501(c)3 tax-exempt status.
- 4The process of incorporating varies from state to state. Check out the relevant government agencies in your state.
- 5Don’t forget, you’ll need to attach the proper language containing your organization’s Dissolution and Purpose Clause to your Articles of Incorporation before filing, or the IRS will reject your application for 501(c)3 tax-exempt status.
Full disclosure, this can be complicated and takes time and effort, which is why we include it for free in our InstantNonprofit service so you don’t have to worry about it.
In summary, incorporating your nonprofit is necessary as you need it to obtain your 501(c)3 tax-exempt status which will help you fund your mission. Be proactive and make sure you get it done.
Cheers to your mission.
Jacqui Long | Yippiekiyay